Rex American Resources ((REX)) has held its Q4 earnings call. Read on for the main highlights of the call.
REX American Resources’ recent earnings call presented a mixed outlook, reflecting both optimism and challenges. The company reported positive developments such as increased ethanol sales and advancements in its carbon capture project, alongside a robust cash position. However, these were tempered by concerns over decreased gross profit and net income, as well as rising project costs and extended timelines. The sentiment was balanced, highlighting both the positive strides and the hurdles faced by the company.
Ethanol Sales Growth
Ethanol sales for REX American Resources saw a modest increase in fiscal year 2024, reaching 289.7 million gallons, up from 285.9 million gallons in 2023. The fourth quarter alone experienced a rise to 74.7 million gallons compared to 72.1 million gallons in the previous year, indicating a steady demand for ethanol products.
Progress on Carbon Capture Project
The company made significant progress on its carbon capture project in Gibson City, Illinois, with the capture and compression facilities nearing completion. REX is poised to move into the sequestration phase, pending necessary permits, marking a critical step in its environmental sustainability initiatives.
Share Repurchase Program
REX demonstrated its commitment to shareholder value through an active share repurchase program. The company repurchased approximately 373,000 shares during the fiscal fourth quarter of 2024 and an additional 282,000 shares in the first quarter of 2025. The Board has authorized the repurchase of an additional 1.5 million shares.
Strong Cash Position
Despite capital expenditures and share repurchases, REX ended the fiscal year with a strong cash position of $359.1 million in cash, cash equivalents, and short-term investments. This financial stability underscores the company’s resilience and ability to fund future growth initiatives.
Interest and Other Income Increase
Interest and other income saw a notable increase of approximately 22% in 2024, totaling $19.2 million compared to $15.7 million in 2023. This growth reflects the company’s effective financial management and investment strategies.
Decreased Gross Profit
Gross profit for fiscal year 2024 declined to $91.5 million from $98.2 million in 2023. The fourth quarter was particularly challenging, with gross profit dropping significantly from $30.4 million in 2023 to $17.6 million in 2024, primarily due to lower selling prices.
Decrease in Net Income
Net income attributable to REX shareholders decreased to $58.2 million in 2024 from $60.9 million in 2023. The fourth quarter saw a sharper decline, with net income falling to $11.1 million from $20.6 million in the previous year, reflecting the impact of reduced gross profit margins.
Project Cost Increase and Delays
The One Earth carbon capture project and ethanol facility expansion faced increased costs and delays, with the budget rising to $222-$230 million due to equipment upgrades and inflation. The project timeline has been extended beyond mid-2025, posing a challenge to timely completion.
Lower Dry Distillers Grain Sales
Sales volumes of dry distillers grain decreased by 3% in 2024 compared to 2023, with a 2% decline in the fourth quarter. This reduction highlights a challenge in maintaining sales momentum in this segment.
Forward-Looking Guidance
Looking ahead, REX American Resources remains focused on strategic growth and operational efficiency. The company plans to continue its ethanol sales momentum and advance its carbon capture project, with substantial investments already made. Despite the challenges of increased project costs and timelines, REX is committed to enhancing shareholder value through its share repurchase program and maintaining a strong cash position.
In conclusion, REX American Resources’ earnings call painted a picture of cautious optimism. While the company is making strides in ethanol sales and carbon capture initiatives, it faces challenges with declining profits and increased project costs. Investors will be keenly watching how REX navigates these hurdles while capitalizing on its strengths.